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Property Management Tips For A Successful Investment Property

Discussion in 'Real Estate' started by Pure Property Management, 23rd Nov, 2011.

  1. Pure Property Management

    Pure Property Management New Member

    23rd Nov, 2011
    Whether you have employed the services of a professional property management company or have decided to manage your investment yourself, there are several key items which can either make your experience rewarding or turn it into a nightmare. The majority of people will employ a property manager and will assume that everything to do with their property will be completed by the property manager. Unfortunately this is not always the case, the property management industry is forever evolving and legislation changes mean that the choice of manager can be the most important decision for a successful property. Even if you have a property manager it is important to monitor the progress of your property to ensure they are completing the required tasks. At the end of the day, if the property has an issue, or is not compliant, the owner is held responsible. The following points have been realised from my property management carer spaning over 12 years and are used daily as I run my specialist property management company Pure Property Agents Sydney. At Pure property agents Sydney we manage investment property throughout Sydney with the principles remaining exactly the same. Below are some of the most important indicators to be monitor in order for a problem free and highly profitable rental property.

    Compliance is Essential

    The regulations which govern investment property are always changing; some changes are substantial while others have little impact. Knowing the changes and ensuring your property is compliant is the easiest way to avoid an issue snowballing. An example of compliance would be the installation and certification of smoke alarms in rental properties. This is in addition to the annual fire safety checks which strata management organise for your property and refers to the internal smoke alarm for your property. In summary the regulation requires that all rental properties must have smoke alarms installed and maintained by a qualified electrician or tradesman. If a fire was to occur in your property, would you be compliant?

    Look at a Landlord Protection Insurance Policy

    Landlord protection insurance is something which you may never need to use, but that one time you need it, will be well worth having. As a professional property manager, clients often say to me “why do I need insurance when I have a property manager? Aren’t you responsible for making sure nothing goes wrong?” The fact of the matter is a GOOD property manager will be able to minimise much of the risk involved with the management of a property by processes such as; screening potential tenants properly, conducting regular inspections or handling rental arrears quickly and efficiently; however there may be events arising which are out of anyone’s control.

    Take for example, a ground floor garden apartment. This type of property may have a higher chance of being flooded by either natural forces like a torrential rain downpour or by a blocked pipe in the complex. Apartments usually have a combined central pipe system which starts at the top floor apartment and heads down the building with each level joining on the way to the mains, with the ground floor property being closest to the mains. If there is a blockage near the mains the water or sewerage will look for the first point to escape and that is usually through the drain of the ground floor unit. The strata may repair the blockage however the owner is responsible for the damage caused which can include replacing carpet or floorboards, repainting walls, replacing damaged furniture and losing rent. To repair these items so the property is habitable again can cost thousands, which the owner may not have available. For an average premium price of a couple of hundred dollars per annum (which is also tax deductable) is it worth the risk not to have insurance?

    Keep Your Property Presenting Well

    When you were looking to purchase your property no doubt you would have inspected numerous properties. How many times did you walk into a property and immediately know that it was a rental property, the 1970’s carpet had heavy traffic marks with an iron burn in the corner, the paint was sundrenched with dirty hand marks, the walls had random screws from previous paintings, and the chipboard kitchen & bathroom cupboards were swollen and falling apart. The presentation of your property is in direct relation to the type of person you will attract as a tenant. Regular maintenance of the property will not only extend the life of the property, it will also attribute to a higher return through a better class of tenant saying longer, low vacancy rates when the property is available, and a structured expense strategy will avoid numerous expensive works. You don’t always have to spend a large amount of money, replacing a tired waterlogged bathroom vanity and rerouting tiles in depleted areas can add years to a bathroom and make it presentable for a few hundred dollars.

    Have A Good Relationship With Your Tradesmen

    There are several reasons why having a good relationship with your tradesman will benefit a landlord, one of the main reasons to note is they become your eyes and ears each time they attend the property to conduct a repair. A property manager can do regular inspection however the tenant is given notice before the inspection and in that notice time they can clean the property or have a friend mind their dog which has not been approved to live in the property. When you send a plumber to look at a leaking tap, the tenant isn’t concerned with making the property acceptable and usually will leave it as normal. By having a good relationship with your trades they will report items which could be a problem back to the property manager. This creates an opportunity which the landlord or property manager can investigate the issue or plan a strategy to rectify the problem.

    Keep On Top Of General Repairs & Maintenance

    One of the biggest complaints received from tenants is that maintenance is not completed or it takes too long for the work to be done. If you have an investment property you will have to pay for repairs, unfortunately there is no way around it. By completing repairs quickly and efficiently it will have a flow on effect which will minimise future repairs and prolong the life of your tenancy as the tenant is happy. If you take care of the issue when it first arises while it is small it can also reduce to potential risk of the maintenance developing into a major repair. To repair a leaking tap is cheap but to repair a leaking tap and water destroyed kitchen cupboard is not.

    Conduct Regular Rent Reviews

    There are many factors which contribute to the rental which a property should be receiving; condition of the property, number of other properties available, the time of the year etc. Some investors take the view that if the landlords expenses have increased then so should the rent, this is not the most effective way of ensuring the property is receiving maximum rental. The Christmas period is renowned for having high vacancy rates as tenants are reluctant to move over this period, as such if you were to increase your rent here there is an abundance of properties for the tenant to chose and chances are they will be able to get a similar property at a lower rent.

    Plan for your rent reviews to be at the most effective time of the year or when the conditions will support the increase. In Sydney we are currently experiencing a rental market where there is minimal property available and there are many tenants competing for these properties, these are the conditions which are favourable for a rental increase. If the tenant decides to vacate the property after receiving the rental increase, the property will be re-leased quickly and with minimal effort.

    Routine Inspections Are For More Than Just The Condition Of The Property

    When most people speak about routine inspections the majority of the emphasis is on the condition of the property. Whilst this is an important part of the inspection, it is not the only reason for conducting a routine inspection. Using this opportunity to speak with the tenant will enable you or your property manager to find information relating to the tenant and which may affect the owner in the future. For example when speaking with the tenant, your property manager might uncover that the tenant is interested in applying for a job interstate or overseas and will be vacating shortly, or the tenant may have an intention to move their partner into the property, or that the tenant may have been made redundant recently from their employment. This type of information can be extremely helpful for the owner and knowing it means the landlord can begin to make preparations in case the tenant vacates, or the property manager should monitor the tenant’s rental payment more closely as they have a higher chance to default while they are unemployed.

    Lease The Property As Fast As Possible

    While this may sound like a no brainer, it is surprising how many property managers or landlords will wait for the property to be vacating and the keys to be returned before they begin showing the property to perspective tenants. The usual notice period received from a vacating tenant is 21 days, and the property can be inspected within the last 14 days of the tenancy. As soon as the vacating notice has been received from the tenant, book inspection times with the current tenant to ensure perspective tenants can be shown through. I try and book 2 mid week inspections and 1 weekend inspection each week for about 20 minutes each. As the majority of perspective tenants require on average 1 – 2 weeks before they can occupy the property, this timing is important if you want to achieve a low vacancy rate.

    Forward Plan Your Leases

    Having a tenant on a current lease (not an expired agreement with a month by month clause) can be the most secure tenancy available however ensure that you make a note of upcoming events and factor them into your agreements. A common oversight with agreements is signing a standard 6 month lease which finishes in December. December is traditionally a tough month for leasing a property and by having a tenancy agreement which finishes around Christmas increases the risk of a vacant property. Instead think about signing a 7 or 8 month agreement which finishes early in the New Year. The extra few months will help with your cash flow over Christmas and reduce the stress of having a vacant property at the wrong time of year.

    Charge For Everything Allowed

    Whether referring to water usage in houses or claiming from the bond at the completion of a tenancy, make sure you charge the tenant for everything which is allowed. This also links into the paragraphs, compliance is essential and have good relationships with your tradesmen. With the recent changes to legislation, before you can charge for water usage the property needs to be fitted with water efficiency devices which limit the flow of water to 9 litres per minute. By installing these devices, you will be able to charge water usage to the tenant and recover several hundreds of dollars each year. At the completion of the tenancy your trades will be able to tell you how an item broke and whether it is general maintenance or damage caused by the tenant. For example; I may just see that the stove gas burner is not working correctly however a tradesman can see that the outlet is full of grease from inadequate cleaning. This type of repair could be charged to the tenants bond as it was preventable if they cleaned the stove correctly while they lived in the property, something which may not have been known if the tradesman did not report back.

    Keep Accurate & Up to Date Documentation

    Technology has advanced to the point where keeping actuate documentation is quite easy; however it still requires the Landlord or property manager input the data correctly. You want to keep a full history on the property, every repair, important conversations with the tenant, emails, and letters basically anything which you can use as a reference if an issue was to arise. By keeping your information up to date and easily accessible it can often avoid issues as it allows you to confidently counter any complaint which has arisen. The main example that springs to mind is with repairs, even if you have great trades occasionally there will be something which is not repaired completely, by keeping the information at hand you can have the tradesman re-inspect the job at no charge instead of sending them again thinking it’s a new issue and paying for the repair twice.

    Hit Arrears Hard and Fast

    Arrears can be one of the most frustrating parts of managing an investment property. The tenant entered into a rental agreement knowing their responsibilities to pay the rent on time however the process to enforce payment once the tenant is in arrears can be lengthily. The best way to combat arrears is not to have any by adopting a zero tolerance for rental arrears. The legislation states that a tenant cannot be chased for arrears until they are 1 day in arrears. Once they are 1 day behind, the recovery process should begin, this may be just a “friendly” phone call with a reminder the rent was not received and to see if there was a problem. What this call is really telling the tenant is that you are on the ball and noticed the rent was not paid. Having an arrears management plan which is followed for all tenants who fall in arrears is advisable, for example: 1st day in arrears tenant receives a call, 3rd day in arrears the tenant is sent a letter, 5th day in arrears the tenant is called again etc.

    Mixing the communication also contributes to the effectiveness of the recovery process as if a tenant falls in arrears several times and they can anticipate that on day 3 a letter will come, the letter has less effect because they have received the same letter before. Use all communication mediums available, phone calls, text messages, emails, letters and visiting them personally. This will increase the chances of recovering the arrears quickly and if the issue is escalated to the tenancy tribunal you will be able to show that you have tried to recover the funds and resolve the issue.

    Get A Depreciation Schedule For Your Property

    A depreciation schedule outlines the decline in value of the assets contained in your property over a period of time. There are 2 types of costs which can be depreciated for a rental property; the first is wear and tear of the fixtures and fittings of a property. The second relates to capital works deductions which are applied to the cost of the buildings construction and spread over a time period. One of the main advantages of depreciations is that they are non-cash deductions. This means that you do not have to outlay funds in order to claim the deduction. The tax department allows you to make the claim as they realise fixtures and fittings reduce in value over time and will require replacement.

    I hope you have found this information to be helpful, if you would like to discuss these topics further or if you would like to discuss a rental strategy for your investment property please do not hesitate to contact me. Alternatively further information can be found at Pure Property – Articles or at Pure Property Services.

    Property Management Tips For A Successful Investment Property

    Simon DavidsonDirector
    Pure Property Agents SydneyPure Property Agents Sydney | Specialist Property Management and Leasing Agency Servicing Landlords Throughout Sydney Including The Inner West, Eastern Suburbs, North Shore, St George & Sutherland Shire
    [email protected]

    Note: The information in this article is opinion only
  2. danielo

    danielo New Member

    14th Mar, 2012
    London, UK